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BHP Billiton has approved a $2.2bn investment in BP’s Mad Dog 2 oilfield in the Gulf of Mexico, removing a hurdle to one of the biggest new offshore projects in the industry.

BP gave its go-ahead for the $9bn development last December but had been waiting for its partners’ approval before pressing ahead.

Mad Dog 2, which has capacity for up to 140,000 barrels of oil per day from 14 production wells, has been seen as a test of the industry’s willingness to renew investment after the downturn in crude prices since 2014.

The cost of the project has been cut in half since it was first conceived in an example of the efficiency savings made across the oil sector over the past two years.

Steve Pastor, BHP Billiton’s president of operations for petroleum, said:

Mad Dog Phase 2 is one of the largest, discovered and undeveloped resources in the Gulf of Mexico, one of BHP Billiton’s preferred conventional deep-water basins. It offers an attractive investment opportunity for BHP Billiton and aligns with our strategic objective to build our conventional portfolio through the development of large, long-life, high-quality resources.

BHP owns 23.9 per cent of the project. A further 15.6 per cent is held by Union Oil Company of California, a unit of Chevron, whose approval is still needed. Production is expected to begin in 2022.

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